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CRTC chairman Jean-Pierre Blais, seen in this file photo, said that "BCE failed to persuade us that the deal would benefit Canadians." (Adrian Wyld / THE CANADIAN PRESS)

By Bruce Campion-SmithOttawa Bureau chief

Thu., Oct. 18, 2012

GATINEAU—In a stunning decision, Canada’s broadcast regulator has blocked the marriage of two media giants, saying it intends to now put Canadians “at the centre” of the country’s communications system.

In a toughly worded decision Thursday, the Canadian Radio-television and Telecommunications Commission said Bell failed to make the case that its $3.4 billion takeover of Astral Media would bring any benefit to television and radio audiences.

Instead, the CRTC said the merger of the two Montreal-based media firms would have put too much control over Canadian airwaves in the hands of one company, undermining “competition and diversity.”

“This transaction would have resulted in an unprecedented level of consolidation in the Canadian marketplace,” CRTC Chair Jean-Pierre Blais told reporters after the decision was released.

“We had grave concerns that BCE (Inc). would be able to use its market power in an unfair manner and to engage in anti-competitive behaviour,” he said.

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Bell said late Thursday that it was “shocked” and “appalled” by the decision, adding that it will ask the federal cabinet to “issue direction to CRTC to follow its own regulatory policy.” It said the decision was “tainted by behind-the-scenes lobbying” by its rivals and claims the ruling violates the regulator's own policies.

“We met all the CRTC’s rules, indeed our acquisition of Astral was based directly on the CRTC’s currently in-place Diversity of Voices policy,” said George Cope, President and CEO of Bell Canada and BCE Inc.

"The wide-ranging benefits to Canadians of the transaction are clear, but the CRTC has told consumers that they and the rules in place just don’t matter.”

Bell had argued that the deal would “invigorate” competition in French-language TV and radio and bolster English-language broadcasting against foreign competition, the CRTC said.

And it also argued that consolidating the French-language market would boost competition against media giant Quebecor. But recognizing potential concerns about concentration, Bell had also proposed to divest itself of 10 radio stations and convert a Montreal station to French from English.

University of Ottawa professor Michael Geist said Canadians should cheer the pro-consumer approach that is taking shape under Blais’s early days atop the CRTC.

“I think it’s a great day for consumers. I think consumers have finally got the CRTC as a regulator they deserve and many have felt has long been missing,” Geist said.

The merger would have created a broadcasting monolith with 107 radio stations — raking in a quarter of all radio revenues — two national English-language TV networks and 49 paid and specialty TV channels.

But Blais said Bell failed to show how the deal would have provided benefits for Canadian broadcasting.

And because of the size of the new media giant, any approval of the deal would have required so many strings attached, it would hurt the entire broadcasting industry, leaving the CRTC no option but to reject it, Blais said.

Bell proved the deal was good for itself “but we were not persuaded that it was in the best interests of Canadians,” Blais said.

“Simply put, this was not a good deal for Canadians.”

The size of the deal — and its surprise rejection by the CRTC — were both unprecedented and comes just four months after Blais, a lawyer and career civil servant, took over as chair of the broadcast regulator.

Asked how this decision should be interpreted, Blais signalled that consumer interests will have a renewed focus under his watch.

“Certainly it is my intent to put Canadians back at the centre of their communications system,” Blais said, vowing to “fully exercise” the CRTC’s mandate.

Geist said the ruling will force telecoms and broadcasters to rethink how they approach regulatory matters “because it’s clear the CRTC has.”

“There has long been a sense that the CRTC functioned as a bit of a rubber stamp . . . . This quite clearly says ‘no way,’ ” said Geist, who holds the Canada research chair in Internet and e-commerce law at the university’s faculty of law.

Telecom expert Iain Grant said the CRTC hasn’t delivered such a sweeping ruling since its 1992 decision to open up the long-distance market.

“I think the commission did show that it’s got some steel in its spine and stood up to Bell,” said Grant, of the consulting firm Seaboard Group.

“I think that the CRTC has never made a decision as momentous as this.”

The decision won praise from consumer advocates who were expecting the commission to come out in favour of the deal.

“This is the first time I’ve seen the commission clearly set out what it expects in terms of public interest. It clearly sets out a bright line that this is too far,’ said Janet Lo, a lawyer with the Public Interest Advocacy Centre.

“There aren’t any precedents to my knowledge where the commission has flat-out rejected a transaction.”

Bell has 30 days to appeal the decision to the Federal Court of Appeal.

In making the ruling, the CRTC surprised many observers who had expected the regulator to approve the takeover, but attach conditions to appease opponents. Instead, it served up a victory for Bell rivals Rogers, Telus and Quebecor, which had all voiced concerns about the mega-merger.

At stake was a melding of two broadcasting heavyweights. Bell has wireless network, residential phone services and 28 conventional television stations, led by flagship CTV network but also including A-channel. As well, Bell operates 29 other specialty channels such as the Business News Network, Discovery Channel and TSN and 33 radio stations.

Astral Media, which has 2,800 employees, offers English and French pay and specialty TV services, with channels such as Teletoon, the Movie Network and HBO Canada. It is Canada’s largest radio broadcaster, with 84 stations in eight provinces.

The CRTC’s decision noted the concerns of interveners — more than 9,700 in all provided comments on the takeover — who complained that previous takeovers had failed to provide benefits, like reduced prices, more choice or improved service.

“A transaction of this magnitude would adversely affect competition and diversity in the Canadian broadcasting system,” the CRTC said.

“Concerns related to competition, ownership concentration in television and radio, vertical integration and the exercise of market power are very substantial and fatal to the application,” the regulator said in its decision.

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